Solution for Problem 9.1.1

You want to invest $10,000 for 20 years  at 10 % interest compounded quarterly.  How much money will you have at the end of the 20 years?

Solve

       Step

i = 0.10 4 = 0.025 

k = 4, r = 0.10, Quarterly means 4 times a year

FV = PV(1 + i)kn

PV = 10,000, n = 20 years

FV = 10,000(1 + 0.025)4(20)

Find the Future Value

FV = 10,000(1.025)80 » 72,095.68

You would have $72,095.68 after 20 years. (before taxes)
Hint: don't round until you are completely finished with your calculations.